NJLRA: Tort Reforms Make New Jersey Competitive

Friday, July 1, 2011 - 01:00

The Editor interviews Marcus Rayner, Executive Director, New Jersey Lawsuit Reform Alliance.

Editor: Please tell us about the New Jersey Lawsuit Reform Alliance (NJLRA). What is its mission?

Rayner: The New Jersey Lawsuit Reform Alliance was founded on a bipartisan basis in 2007 to reform New Jersey's civil justice laws to ensure that they are fair and that they treat defendants and plaintiffs equally before the law. A major part of NJLRA's mission is to make sure that New Jersey is economically competitive for our largest employers, such as pharmaceutical, bio and medical device companies. These companies employ hundreds of thousands of people directly or indirectly in the state. If the civil justice climate is unfair to defendants, they suffer greatly and may consider relocating or expanding in other states, with a consequent loss of New Jersey jobs.

Editor: Has this happened?

Rayner: Yes. The broader trends are alarming. New Jersey was once known as the nation's "medicine chest," because we had the most pharmaceutical jobs in the country. Our percentage has dropped significantly in the last ten years, and we are now second to California. As recently as the 1990s, one in five pharmaceutical jobs in the United States were held by a New Jersey resident. Today, that number has dropped to one in seven, and it will likely decline even further. Eighteen percent of pharmaceutical startups are in California. Only three percent are in New Jersey. There are pharmaceutical companies that may have left or moved operations out of state, and our greatest concern is that many are expanding into other states and creating new jobs there.

Editor: One of the deterrents to doing business in the state is the New Jersey Consumer Fraud Act. What is NJLRA doing about this?

Rayner: Right now, the New Jersey Consumer Fraud Act mandates treble damages, allows non-New Jersey residents to sue in our courts, and does not require reliance but only causation. None of our neighboring states provides for this lethal combination.

NJLRA worked with a bipartisan group of legislators to introduce a Consumer Fraud Reform Act, which includes several provisions to make the law fairer to businesses: A-3333/S-2855. Most importantly, the legislation requires reliance on a fraudulent act, which aligns New Jersey's civil justice laws more closely with those of neighboring states. In addition, instead of requiring treble damages as the law does currently, the Consumer Fraud Reform Act would allow up to treble damages at the court's discretion. It further cracks down on "litigation tourism," which has become an emerging industry in New Jersey, by prohibiting suits involving non-New Jersey transactions. Finally, it would limit business-to-business consumer fraud suits like those involving suppliers and contracts between businesses, limit attorney's fees in consumer fraud suits and carve out those entities that already are heavily regulated by another regulatory scheme, like the FDA.

Editor: Please discuss the need for an appeal bond cap in New Jersey.

Rayner: New Jersey currently has an appeal bond cap of $50 million for tobacco companies. NJLRA is seeking to expand that cap to all civil defendants in all of the state's industries, not just tobacco. We introduced legislation, A-2473/S-480, in conjunction with a very motivated senate sponsor, Senator Raymond Lesniak, to remedy this situation. Unfortunately, the trial bar has been lobbying hard to prevent it from being considered by the Senate Judiciary Committee. The assembly version, however, is on second reading and is awaiting a floor vote by the full chamber.

Editor: NJLRA's blog, Lawsuit Reform Watch, has been tracking the efforts of the Christie administration to change the process for appointments to the New Jersey Supreme Court. Why is it desirable to change the appointment process?

Rayner: Thank you for mentioning our blog at www.lawsuitreformwatch.org. It provides viewers with a regular update on what is going on in Trenton with regard to civil justice issues. The New Jersey Supreme Court is critical to the business climate in the state of New Jersey, and Governor Christie is committed to having a civil justice climate in the state that is welcoming to business. He is working to appoint justices who understand the concerns of business.

Last year, the governor chose not to reappoint Justice John Wallace, which was controversial because it was the first time a governor decided not to reappoint a sitting justice to the Supreme Court for lifetime tenure. Instead, he appointed Anne Patterson, a business defense lawyer who has worked with many NJLRA members and understands the concerns of business. It's important that the Supreme Court understand its role in the broader sense of how it can influence New Jersey's civil justice system. Governor Christie will have an opportunity to make three appointments, including Anne Patterson, by the fall of 2012, so there very well may be three new justices appointed by Governor Christie on the Supreme Court.

Editor: What about business courts?

Rayner: The time is well past due that we have them. New Jersey is the only state among our neighboring states (Pennsylvania, New York, Connecticut and Delaware) that does not have a business court.

Editor: I understand the rules of evidence in New Jersey courts are also not welcoming to business.

Rayner: New Jersey is neither a Frye nor a Daubert state. Our Supreme Court has adopted some rules of evidence, which they frequently tend to modify through case law. Many in the business community are looking for more predictability with respect to the qualifications of expert witnesses and the admissibility of their testimony. This can be of critical importance to the outcome of cases involving the many pharmaceutical, bio, medical appliance and other high-tech businesses in our state.

NJLRA petitioned our Supreme Court in 2008 to change the rules of evidence to more closely align with the federal Daubert standard; however, the Court declined to do it at the time. We are hopeful that, in the future, the Supreme Court will adopt the Daubert standard.

Editor: Please discuss the ongoing debate about whether financial institutions seeking high returns should engage in financing third-party litigation.

Rayner: It's a serious concern. Third-party litigation financing can be prejudicial to a fair civil justice system. Companies that finance this litigation seek to obtain a high percentage of any recovery, and this usurious return on their investment victimizes the people they're ostensibly trying to help. Further, third-party litigation financing increases litigation abuse regardless of jurisdiction and leads to unfair outcomes.

Editor: Are constraints placed on the ability of the New Jersey attorney general to hire private attorneys on a contingency basis?

Rayner: New Jersey is blessed to have an appointed attorney general rather than an elected one. I say blessed because that means that our attorneys general are rarely trying to build a career or to become a future governor. In New Jersey, there are fairly good rules in place to focus sunshine on and thereby limit the retention of private lawyers to pursue litigation on behalf of the state. Under Governor Corzine, we were successful at lobbying the administration on this issue, and as a result, Governor Corzine signed an executive order in 2009 codifying the sunshine rules already in place in the attorney general's office. However, rather than relying on executive orders, we would like to see legislation to assure that no future attorney general farms out litigation to private lawyers in a way that isn't completely open to public scrutiny.

Editor: Lt. Governor Kim Guadagno has declared that New Jersey is "open for business." What is your perspective on reforms that may be necessary to attract business to New Jersey?

Rayner: The administration has begun to reverse the perception that New Jersey's government is not welcoming to business. I credit the Christie-Guadagno administration as well as Senate President Steve Sweeney for much of it.

At the same time, New Jersey still has a long way to go to make its business climate as inviting as some of the states in the Southeast.

It's worth noting that a number of states, including Texas, Florida, Tennessee, Oklahoma, and South Carolina, have enacted or are seriously considering very broad-based tort reforms - a tool in the toolkit that is required in order for a state to attract and retain businesses.

Editor: Is New Jersey a good place to do business?

Rayner: Without a doubt. I'm a lifelong New Jersey resident and enthusiast. The state has tremendous assets to offer the business community, from our educated workforce to our transportation infrastructure and the simple geography of being so close to Philadelphia and New York.

This is an excellent state to locate a business. However, attracting new business and jobs is highly competitive - not only among U.S. states, but also globally. Whether you're talking about tort reform, tax rates or right-to-work legislation, New Jersey faces competition from other states and from nations around the world. New Jersey needs to remain competitive, and tort reform plays an important role toward that goal.

Editor: Has the Christie administration been supportive of the NJLRA's efforts?

Rayner: Governor Christie ran on a platform that included tort reform. He pledged three specific reforms, which included class action reform, reforming New Jersey's rules of evidence, and limiting the number of out-of-state plaintiffs that can come into the state to sue. NJLRA has a great relationship with the Christie administration and works closely with it on many of the issues we discussed during this interview. We look forward to the governor's taking an even greater leadership role on tort reform in the future.

Editor: What can The Metropolitan Corporate Counsel readers do to support the reforms you've mentioned? MCC reaches over 22,000 corporate counsel at 9,000 legal departments nationwide, including 2,200 New Jersey corporate counsel at 1,100 locations. Regardless of their location, MCC's corporate counsel readers with business interests in New Jersey will receive your message.

Rayner: Several things. The first and easiest is to support NJLRA by visiting our website at www.njlra.org and signing up to receive our email updates to stay informed about civil justice developments in Trenton. We also have active Facebook and Twitter pages to keep you abreast of developments as they happen. The second is to talk to legislators and the Christie administration about the need for civil justice reform. Legislators and governors respond to feedback from constituents. If they're not hearing about the need for civil justice reform, then they will conclude that it's less important than other issues. You can find your legislators and their contact information by following the link on our website, under "Issues."

So, talk to your legislators and the governor, support NJLRA and make your company a leader in civil justice issues. If your company has experienced a damaging lawsuit or is simply in an industry that is prone to litigation abuse, it is helpful for it to be an industry leader, both to educate colleagues and other businesses in the industry and to convince our government about the need for reform.

Please email the interviewee at mrayner@njlra.org with questions about this interview.